Are you looking to start a nonprofit corporation in Texas, but you’re not entirely familiar with how the formation process works?
Forming a nonprofit organization can have some tricky compliance requirements, and you don’t want to risk making any mistakes during this process. In this guide, we’ll discuss all the relevant details of forming a nonprofit corporation in Texas.
To get started, please reference our 11-step guide below or hire a professional online incorporation service to get started.
How to Form a Texas Nonprofit Corporation (in 11 Steps)
1) Name Your Nonprofit
The first step for forming a nonprofit organization in any state is to come up with a strong name for it. Remember that the name of your nonprofit is often your best opportunity to make a good first impression with people, and you should clearly describe your organization’s mission in your name.
Before you become too attached to one name idea, you should run a Business Name Search on the Texas Secretary of State Direct website. This will tell you if someone else is already using your desired name, or if it’s available for your nonprofit to use.
Get Your Nonprofit URL
To solidify your brand and to fully lean into your nonprofit name, register the URL. Through GoDaddy you can easily register it and build a professional website so that nobody else can use or claim it.
2) Designate an Incorporator and an Initial Board of Directors
The incorporator is the person who is responsible for preparing, signing, and filing your nonprofit’s Articles of Incorporation. This document is the form that officially creates your organization with the state of Texas.
At this time, you should also choose your initial board of directors.
In Texas, you are required to have at least three people on your initial board.
3) Designate a Registered Agent
Texas nonprofit corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation.
Who Can Be My Registered Agent? A registered agent must have a physical address within the state of Texas where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The Texas Secretary of State says that,
A registered or appointed agent’s duties are: to receive or accept, and forward to the represented entity at the address most recently provided to the registered agent by the represented entity, or otherwise notify the represented entity at that address regarding, any process, notice, or demand that is served on or received by the registered agent; and provide the notices required or permitted by law to be given to the represented entity to the address most recently provided to the registered agent by the represented entity.”
We recommend hiring a professional registered agent service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or corporate or personal address off the public record.
4) File the Certificate of Formation
The official document required to form your nonprofit corporation with the state of Texas is the Certificate of Formation.
This three-page document includes all of the vital information describing the organizational structure of your nonprofit, including the following information:
- Name of your nonprofit corporation
- Name and address of your registered agent or the organization serving as the registered agent
- Names and addresses of your initial directors
- Whether or not your corporation will have members
- Purpose for your organization
- Language for tax exemption as required by the IRS
- Name and address of the organizer
- Effective date of your organization (if different from filing date)
- Signature of organizer
Once you’ve finished filling out this form, you’ll need to write a check for $25 and mail it along with your Certificate of Incorporation to the following address:
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
The Texas Secretary of State typically processes nonprofit corporation formations within 3-5 business days of receiving your certificate. This processing time assumes that all of your information has been filed correctly.
5) Acquire an EIN
According to the IRS, every nonprofit corporation should obtain a federal tax ID number, otherwise known as an employer identification number (EIN).
The EIN enables your nonprofit to hire employees, open business bank accounts, and file for 501(c)(3) tax exempt status. The process to acquire an EIN is quite simple, and includes the preparation and filing of one simple form. Obtaining an EIN is also free.
6) Establish Bylaws and a Conflict of Interest Policy
Think of the bylaws as a governing document for how your nonprofit corporation will be operated. Bylaws outline procedures for things like holding meetings, outlining your membership structure, defining your corporate purpose, describing the responsibilities of your board of directors, and other important details.
A conflict of interest arises when a contributor to your nonprofit has personal interests that compete with those of your corporation.
The conflict of interest policy protects your nonprofit in these situations. It includes a duty to disclose clause that says anyone involved with your nonprofit must disclose any financial interests and material facts to your directors. It also outlines procedures for addressing conflicts of interest if they ever arise.
7) Hold an Initial Meeting and Establish Your Corporate Record
At this point, you’re ready to hold an initial organizational meeting with your board of directors. At this important meeting, you need to elect directors and officers, approve the bylaws and conflict of interest policy, and adopt resolutions.
As with any meeting of your nonprofit corporation, you should take detailed notes of everything that takes place. This documentation can then become part of your corporate record, which is a permanent written record of all important organizational decisions.
8) File for Texas Tax Exemption
Most nonprofit entities in Texas can receive tax exemption from both the state’s franchise tax and the sales tax. To get it, you’ll first need to file for and receive exemption on the federal level. Once the IRS has designated you as a 501(c)3, you’ll need to file the application form AP-204, which you can find here. For more information on this important step, the Texas Comptroller can help.
9) Register for Charitable Fundraising
In Texas, most nonprofit entities are not required to register with the state prior to soliciting charitable contributions. The primary exception to this is certain law enforcement organizations which also make solicitations; those organizations must register. To learn more, check out the state’s Registrations and Filings Page on the Attorney General’s website. Then you’ll be ready to raise funds for your cause.
10) Obtain Business Licenses and Permits
While Texas does not have a general business license that applies to all companies operating in the state, there are hundreds of industry-specific permits and licenses that you may need to acquire for your organization.
For one, Texas upholds the licensing requirements of any federally-regulated industries. Check here to determine if your business must be licensed by a federal agency.
You’ll also want to take a look at the state’s database of licenses and permits to determine if any of them will apply to your nonprofit corporation.
Your city or county may also require general business licenses. Here some of the largest cities in Texas which require local licenses and/or registrations:
11) Acquire Insurance
Every business with employees located in the state of Texas is required by law to obtain two different kinds of insurance policies: workers’ compensation and unemployment insurance.
You can learn more about these insurance types and how they apply to Texas businesses by visiting the Texas Department of Insurance and/or Texas Workforce Commission websites. No matter what line of business your nonprofit is in, you need these policies.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance, but these are not legally required.
Where Can I Find Help for My Texas Nonprofit?
The process of forming and maintaining nonprofit corporations can be tricky, no matter which state you’re located. Fortunately, there are great resources in Texas to help you out in case you get stuck.
As for the state of Texas, if you require assistance, you can always turn to the Texas Association of Nonprofit Organizations. In their own words, TANO’s “concern and focus is every nonprofit entity within our state no matter its size or budget, urban or rural location.” TANO does require membership, but joining will grant you a wide variety of benefits, including member discounts, unlimited postings on TANO’s job board, access to education and training, fundraising assistance, and more, so joining will be worth your while.
In addition, if you would rather hire a service to incorporate your nonprofit for you, that’s an option as well. There are plenty of services that can handle much of the formation process, leaving you more time to focus on the actual operation of your nonprofit corporation.
These service providers (like Northwest Registered Agent) also offer valuable and convenient bonus features, like the inclusion of a full year of registered agent service with the purchase of a nonprofit formation package. They can save you a considerable amount of hassle, and all without costing an arm and a leg.
As you can see, there are quite a few crucial steps that you’ll need to take if you want to form a compliant nonprofit corporation in the state of Texas. However, it’s important to remember that if you need help at any time, it is available to you ― you don’t need to DIY the entire process.
We hope this guide helped you understand the details of the Texas nonprofit corporation process, and we wish you the best of luck with your new charitable organization!